Borrowing profitability from the future ?

Summary : in the knowledge economy economy era, investing on human capital development is key but stays marginal because of short term profitability logics. But does this vision actually creates value ? Locally, for the enterprise, it seems so. But globally speaking the question is worth being asked because the related costs does not disappear but are shifted to the society or the future of the enterprise what, in fine, backfires in a long term perspective since it’s becoming harder to pay the debt caused by decisions made in the past. As cycles shorten, it may lead to a dead-end.

A couple of days ago, a started reading again The New Capitalist Manifesto: Building a Disruptively Better Business by Umair Haque.This book was already brilliant when it was issued even if it more comfortable to think that the author was exaggerating too much, that his predictions would never happen. Less than one year after, the least we can say is that he was right.

Many concepts and ideas developed in the book look innovating, disruptive…too much according to some even if the news tell us the contrary. A better explanation would be to say theiy’re thought-provoking. Among these ideas, there’s the one according to which enterprises have been borrowing  their benefits while shifting costs to others for decades and that, one day, the debt becomes so big that the whole system jams.

Practically speaking it means that profitability is often overestimated because enterprises don’t assume all their costs that are shifted to the society of the future of the organization. Environmental costs, training costs…many of these things are known under the name of corporate social responsibility. If the whole costs was taken into account we would see that lots of enterprises are not socially profitable. Le system works until the day when shifted costs became so big that society can’t deal with them. And it backfires on the enterprise.

Social Business and triple bottom line experts (not the social business used to rebrand enterprise 2.0, the real  Social Business) will find here some concepts they know quite well and that I’ll sum up using the words of Antoine Riboud when he was leading Danone : enterprise responsibility does not stop at the enterprise’s doors and making one’s ecosystem poorer to become oneself richer will cause one’s failure because it kills future markets.

I don’t claim I’m able to have such a deep thinking as Haque but, by thinking about these things again and again to assess how relevant they were, I ended asking myself a couple of questions.

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Enterprise 2.0 and ROI : beyond numbers it’s about meaningful arbitrations

The debate on the ROI of Enterprise 2.0 is far from its end even if I often have the impression that avoiding the question is a common easy answer. Either the “we don’t care” or the ‘it’s different, you can’t understand” answers don’t satisfy me.

When an enterprise is asked to invest energy, time, money, it’s legitimate to want to know what it will get in return. More precisely :

- if their will be any return

The answer is obvious : yes

- if this return will be a vague “better something”, nebulous and unseizable or if it will be measurable in a way or another, in a un unit that would not be too eccentric (money for instance…)

Here, my answer would be double. There are things that have a direct impact on opeations and thant can be measured and quantified. For instance the lenght of the innovation or sales cycle, the time saved by avoiding micro-coordination…

There are things that are not measurable by themselves but impact things that are. This is clearly demonstrated by Strategy Maps.The idea is to implement the mechanisms that will ensure that what’s invested to improve intangible will actually impact value creation. In brief, make sure that everything is conherent with the investments and that the way work is done is aligned with that in order investments are made profitable (it’s seldom said but businesses usually don’t suffer from a lack of talent or innovation…only a lack of coherence that impacts the whole value creation process, preventing processes to harness talents and innovation potential).

3°) If this return can be foreseeable in a mechanical and linear way.

Here, the answer is : no. In the other hand, between the exact prediction and the “we can’t predict so let’s five give up” I think there’s a long work to be done by searchers and specialists to be done. Without this work that will help to implement relevant measurement and predicition means, the risk is high to see managers piloting businesses with indicators that have nothing to do with the current reality, the way operations are done and the matter that is processed.

That said, there’s another side of the issue that should also be tackled. Basically, being sure that the investment will bring some benefits should be enough to start a project, regardless of the quantifiable predictability of the benefit. The latter matter when the point is not to choose between doing and not doing but arbitrate the choice between two possible investments. In this case it’s obvious that the chosen one will be the one with the highest return so both possibilities have to be comparable what implies being predictable.

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Socializing your decision making process

A good example of process socialization is about decision making. A few weeks ago I read this interesting paper from Olivier Sibony (Associate Director at McKinsey). Since the article is in French I hope Google Translator will provide you with a good english translation.

What is it about ?

Making the right decisions is key to be a successful business. Nothing new here. But Olivier Sibony provides us with interesting numbers.

. Between those who have used the analysis tools the most advanced and recognize those who were far away, the performance gap is important: 2.7 points in return on investment between them. But those who have followed a process of rigorous and objective decision showed a much higher performance: the gain is 7.3 points ROI ! In other words, there are three times more to gain by using a method of decision-making!

The impact of a good decision is obvious and its ROI clear enough to justify enteprises invest in what makes it possible. It would seem obvious that the solution is to be brought by analysis tools and the definition of relevant indicators. Nothings social here. At first sight…

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Social medias : don’t mistake revenue for organizational performance

Yesterday morning someone pointed out this  CioInsight survey to me (the publication date isn’t mentioned although it would be an useful information…).

It tells us that, among the technologies that will be expected to drive revenue, only 11,5% of enteprises quote social networks and only 12.3% quote wiki. Does it mean enterprise 2.0 is unable to generate revenue ?

My answer is “not obviously wrong”. And if one would tell me I spend my time saying the opposite I’d answer people have to be careful of the words they use and the concepts they use.

Let me explain.

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